G.R. No. L-12437; June 30, 1959
THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC. and MIGUEL CAMPOS, plaintiffs-appellants, vs. C. H. HOSKINS & CO., INC., defendant-appellant.

FACTS

The Philippine American General Insurance Company, Inc. (PHILAMGEN) was asked by Epifanio J. Alano to issue a bond guaranteeing a P25,000 loan from Antonio I. Roque. Alano offered a first mortgage on three parcels of land as security. PHILAMGEN engaged C. H. Hoskins & Co., Inc. (HOSKINS) to inspect and appraise the property. HOSKINS, through its vice-president Antonio Varias, submitted an appraisal report dated June 20, 1952, representing that the property was: (a) about 26 kilometers from Manila; (b) accessible by regular bus service; and (c) at least 3/4 productive with a fair valuation of at least P43,000. Relying on this report, PHILAMGEN issued the bond on June 23, 1952. The Alanos executed a promissory note in favor of Roque and a mortgage to secure PHILAMGEN. However, the Register of Deeds of Bulacan refused to register the mortgage in PHILAMGEN’s name because the land was originally a homestead and could not be mortgaged to a private corporation. To facilitate registration, PHILAMGEN’s president, Miguel Campos, became the mortgagee, and he executed an indemnity agreement in favor of PHILAMGEN.
The Alanos defaulted on the loan. Roque demanded payment from PHILAMGEN, which paid P25,000 on October 4, 1952. Campos then foreclosed the mortgage. The property was sold at public auction, and Campos bought it as the highest bidder for P10,000, obtaining new certificates of title.
When Campos sought to take possession, Varias could not locate the property. A surveyor, Pedro Bundang, was later engaged and found the actual location. His findings revealed glaring discrepancies from HOSKINS’s report: the properties were not in Novaliches or Caloocan, Rizal, but in Norzagaray and San Jose del Monte, Bulacan; they were accessible only by foot trails, not by regular bus service; and they were largely unproductive and uncultivated, contrary to the report’s claims of productivity and income.
PHILAMGEN and Campos sued HOSKINS for damages of P50,000 and P10,000 in attorney’s fees. HOSKINS defended that its appraisal was based on information provided by Alano, whom PHILAMGEN had sent. The trial court absolved HOSKINS from the complaint and dismissed its counterclaim. Both parties appealed.

ISSUE

Whether HOSKINS is liable for damages to PHILAMGEN and Campos due to alleged false and inaccurate representations in its appraisal report.

RULING

The Supreme Court affirmed the trial court’s decision, holding that the plaintiffs’ action was premature and that they had no cause of action against HOSKINS under the circumstances.
The Court acknowledged the inaccuracies in HOSKINS’s appraisal report regarding the property’s location, accessibility, and productivity. However, it focused on the legal relationships and remedies among the parties. PHILAMGEN’s recourse for the loss it suffered from paying Roque was against Campos under the indemnity agreement Campos had executed. Campos’s recourse for the deficiency after the foreclosure sale (he bought the property for only P10,000 against a P25,000 debt) was to seek an alias writ of execution against the original debtor, Alano. There was no showing that these steps had been taken. The Court agreed with the trial court’s observation that Campos had no direct cause of action against HOSKINS because it was PHILAMGEN, not Campos, who paid the loan. Conversely, PHILAMGEN had no cause of action against HOSKINS because it held a counter-security (the indemnity agreement from Campos) and its right to collect from Campos was conditioned on the property being sold. Since the property had been sold to Campos himself at auction, the situation between PHILAMGEN and Campos regarding the indemnity needed to be resolved first. Therefore, the action against HOSKINS was premature. The decision of the trial court was affirmed without costs.